November 24, 2013

Thoughts on SaaS

Generalizing about SaaS (Software as a Service) is hard. To prune some of the confusion, let’s start by noting:

For smaller enterprises, the core outsourcing argument is compelling. How small? Well:

So except for special cases, an enterprise with less than $100 million or so in revenue may have trouble affording on-site data processing, at least at a mission-critical level of robustness. It may well be better to use NetSuite or something like that, assuming needed features are available in SaaS form.*

*Truth be told, I’m not up to speed on mid-range SaaS application suite alternatives.

Continuing that thought — if you’re a mid-range application software provider, you have to develop a SaaS version of your product line. That’s a very different business model than the apps + OEMed platform you’re probably providing now, but it’s the best way to serve your customers going forward. And by the way — while mid-range application software is commonly sold on a regional basis, SaaS can be sold more globally; after all, the the need for onsite service is eliminated, and price points should in most cases fit with telephone sales. Yes, national language and regional data privacy rules are both concerns, but they still leave the available markets looking much bigger than regional resellers have traditionally enjoyed. So expect shake-outs in a whole lot of vertical markets, as vendors horn in on each other’s territories, and a few elephantine winners perhaps emerge.

The argument above assumes that extreme reliability is needed. So there’s nothing necessarily wrong with a small team of business analysts sticking an RDBMS appliance* in a corner and managing it themselves. If it sputters from time to time, who cares; using it still may be easier than getting that data in and out of the cloud. But eventually, if all the data is remote anyway — SaaS, website, etc. — then it may make sense to do analytics remotely as well.

*Previously, that appliance might have been from Netezza; now, my first thought is the cheaper — albeit more limited — Infobright.

The arguments that direct smaller companies toward SaaS apply to large enterprises to, but they aren’t as dispositive. Larger enterprises can actually afford to do their own IT operations if they want to. What’s more, moving away from in-house operations is harder for big firms, due to the larger and more customized portfolio of legacy systems they’re likely to have. That said:

That leaves us with the questions as to when and how large enterprises should or will move their core applications to SaaS and/or the cloud. Given the length of this post, I won’t try to answer them now. But for starters:

Comments

4 Responses to “Thoughts on SaaS”

  1. Foobarista on November 26th, 2013 3:52 pm

    One other question for SaaS vendors is whether *they* should use the cloud for hosting tenant data. We did not as we’re a security play and it’s hard enough to pass a security audit with your own data center without the added complexity of auditing the cloud vendor.

  2. M-A-O-L » Thoughts on SaaS on November 29th, 2013 7:59 am

    [...] SaaS Intro 2013 Thoughts on SaaS [...]

  3. Robert Hodges on November 29th, 2013 11:36 am

    Nice 360-degree summary of a complex subject. Regarding multi-tenancy as an architecture, this is really an attribute of SaaS vendors that don’t have very large customers. Once customers get large enough to occupy a full pod (and pay for it) they get separate instances. Assuming pure multi-tenancy is a business-limiting choice for SaaS applications.

  4. clive boulton on May 18th, 2014 3:34 pm

    About the only mid-range application software providers, I can dig who’ve develop a SaaS version of are new vendors. NetSuite, Workday, and folks like Finance Force / Kenandy / Rootstock developing on the Salesforce.com platform. The majority of the mid-market appears to be in hibernation.

    Perhaps because so many mid-range are owned by private equity bankers concerned more with profits than being prophets.

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